IB Docs (2) Team
Methods of lean production
Methods of lean production (AO2)
Lean production is manufacturing process concerned with eliminating waste in the production process. The use of lean production methods helps to prevent or minimize the chances of a business from incurring waste (inefficiencies) as a result of not detecting quality issues during the production process.
The IB specifies the following two methods of lean production (HL only):
Continuous improvement (Kaizen)
Just-in-time (JIT).
Continuous improvement (Kaizen) (AO2)
Kaizen is about making small steps to continually improve
Kaizen is the Japanese process and philosophy of lean production that involves the process of making continuous small, incremental improvements to various production processes in order to achieve greater efficiency. The word means to ‘change for the better’. Kaizen is therefore about developing an organizational culture of continuous improvement.
Effective implementation of Kaizen depends on whether senior management are willing to delegate and empower their staff to be involved in the decision-making process. This means that employee empowerment is a key requirement for Kaizen to occur, as employees are given the responsibility to provide suggestions about what improvements can be made. This may involve regular, scheduled meetings where employees are invited to share their opinions, feedback and suggest areas for improvement.
Of course, not all the ideas presented are necessarily feasible or can be adopted, but the aim is that some of the suggestions for improvement will be of value to the organization. This approach also has a positive impact on staff motivation and labour productivity, as workers feel respected and valued by the employer.
Kaizen requires input and commitment from all employees
Kaizen is also advantageous because employees are usually more receptive to small and incremental changes, rather than highly disruptive or unsettling changes.
However, embedding Kaizen into the organizational culture is likely to be both time consuming and expensive, such as the scheduling of meetings and the costs of staff training and upskilling. For Kaizen to work, all staff members are required to believe in the approach, and put in the necessary effort and commitment to eliminate waste and to make efficiency gains. Staff may resent the use of their time in this way (which could be counter-productive) and feel that it is the role and responsibility of managers to make such decisions (they are, after all, paid to do so!)
Read more about the key principles of Kaizen by clicking on the icon below.
The key principles of continuos improvement (Kaizen)
Recall that Kaizen is a Japanese term meaning "continuous improvement." It represents a philosophy or culture that strives to enhance work processes, practices, and products through gradual, ongoing modifications. Ten key principles of continuos improvement include the following:
Emphasize process improvement - Kaizen directs its focus towards enhancing the process itself rather than solely concentrating on the end result. By enhancing the process, there will be a corresponding improvement in the outcome.
Focus on eliminating waste - Kaizen fosters the culture of eliminating waste comprehensively, encompassing aspects such as time, resources, and materials.
Place emphasis on teamwork - Kaizen emphasizes the importance of collective effort, involving all employees across all organizational levels, fostering a collaborative team environment.
Empower employees - Kaizen acknowledges the expertise of employees in their respective roles and fosters a culture that encourages them to assume responsibility for driving the improvement process in the organization.
Utilize big data and data analysis: Kaizen leverages data and analysis to identify improvement opportunities and assess the effectiveness of incremental changes in the organization.
Pursue incremental improvements - Kaizen promotes the pursuit of small, continuous improvements instead of seeking radical changes, which are disruptive, risky, and expensive.
Promote process standardization - Kaizen emphasizes the importance of standardizing processes to achieve consistency and to minimize variations in the output of goods and services.
The pursuit of perfection - Kaizen acknowledges that perfection may be unattainable, but it fosters a culture of continuous commitment and ongoing dedication towards achieving it.
Customer orientation - Kaizen places significant emphasis on comprehending and fulfilling customer needs and requirements.
Embrace change: Kaizen recognizes that change is necessary for advancement and encourages a culture of continuous change and improvement.
Just-in-time (JIT) (AO2)
Holding large volumes of stock (inventory) can be very costly and wasteful. Just-in-time (JIT) is a lean method of stock control whereby materials and components are scheduled to arrive precisely when they are needed in the production process. Hence, JIT aims to eliminate buffer stock requirements by ensuring raw materials and components are received just before they are needed.
By contrast, a just-in-case (JIC) stock control system requires businesses (such as Coca-Cola) to have large quantities of stock in the event that it is needed for an unexpected order or in case there is a problem with the supply chain (such as a late delivery of stock). However, this stock control system is not lean, because of the high costs of storage and potential waste if the stocks become damaged or go out of date. Purchasing large volumes of stock just in case it is needed also requires large amounts of money, which can harm a firm’s cash (or liquidity) position.
JIT works on the principle of firms placing regular orders with their suppliers, rather than relying on large, irregular orders. For example, many of the world’s largest supermarkets use fully automated JIT delivery systems. They depend on computerised systems such as scanners at the checkouts that link to their stock control and ordering systems, which automatically place orders with suppliers. This helps to ensure the supermarkets are adequately stocked, as empty shelves would mean lost sales and unhappy customers.
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Supermarkets use JIT systems to ensure they have adequate stocks for sale
Advantages of JIT
The advantages of just-in-time (JIT) as a method of lean production include:
Buffer stocks are not required, so this reduces the costs of stock management and waste.
It avoids the opportunity costs of stockpiling, such as the costs of storage, insurance, maintenance or security, damaged stocks, and obsolete (out of date) inventory.
The above points can also improve the firm’s cash (liquidity) position.
JIT fosters lean production as workers need to be more careful and ensure things are done right, first time round as there are no spare stocks.
Disadvantages of JIT
The disadvantages of a just-in-time (JIT) stock management system include:
As orders are placed in smaller quantities at regular intervals, administrative and implementation costs of JIT can be relatively high.
Similarly, JIT stock control does not enable firms to enjoy bulk buying economies of scale as raw materials and/or component parts are only ordered as and when they are needed for production.
There is the risk of running out of stock if demand is higher than expected.
JIT is inflexible, which puts the organization at greater risks and unforeseen circumstances.
There is total reliance on third party suppliers to deliver the right products, at the right time. Having direct and easy access to local and reliable suppliers is not always possible, even though it is essential for a JIT system.
Top tip!
Although lean production is an idealistic philosophy for operations management, it can never truly be achieved. However, lean production becomes an attitude and approach adopted by organizations in their strive to continually cut unnecessary costs, reduce defects, and improve efficiency.
Case Study - The Ever Green
Watch this CNN coverage of the Ever Green 400 metre super cargo ship that caused major delays to deliveries across the world as it got stuck for almost a week in Egypt's Suez Canal (which is less than 300 metres wide). The event highlighted the importance of supply chain logistics and the limitations of relying on a just-in-time delivery system.
The Ever Green had blocked 422 ships, waiting to get out of the canal, meaning it would take 5 to 6 days to get all the ships out. Over 30,000 cubic metres of mud had to be removed to free the Ever Green. There was around 1,800 containers on the Ever Green itself, with a diverse range of goods including oil, toilet paper, IKEA furniture, and livestock. About 12% or $400 million per hour of world trade goes through the Suez Canal, so the backlog proved to be extremely costly to businesses from different parts of the world.
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